$8.25 billion agreed value of TAPS-for now

The Trans-Alaska pipeline is taxed by the State of Alaska and municipalities where the pipe and its related facilities are located. In unincorporated areas, such as the Mile 60 area of the Richardson Highway, the state is the only taxing entity.

In a surprise move Monday, the Valdez City Council signed off on a negotiated deal that will set the taxable value of the Trans-Alaska Pipeline System (TAPS) at $8.25 billion for this year.

The agreement – set to be signed by the mayors of municipalities that tax the 800-mile pipeline, the State of Alaska and TAPS owners – will effectively stop the SARB process for this year and give both the taxpayer and the municipalities a solid budget number.

“Everybody agreed that using the number of $8. 25 billion this year - which is a drop of a little under 5 percent from last year – as just a plug number, it’s not an etched in stone number, it’s sort of a placeholder number for 2012.,” Bill Walker, city attorney, said Monday morning in a special council meeting. “Then everybody stays the SARB process.”

In a nutshell, the agreement states that if Dept. of Revenue will declare the taxable value of TAPS at $8.25 billion this year, the municipalities and TAPS owners will appeal that number to the State Assessors Reconsideration Board, SARB, but request an immediate stay pending the outcome of litigation stemming from past years’ assessment. Since 2006, the state, the municipalities and TAPS owners have been at loggerheads over the taxable value of the pipeline and its associated properties, with both sides appealing the value to SARB, and later to state courts.

“With everybody in agreement at the point, we’ll have the taxpayer, the municipalities, the state of Alaska, all saying the same thing,” Walker said, “Let’s not go through a SARB process this year.”

The deal does not end the lawsuits and appeals regarding the taxable value of TAPS properties that are currently on appeal or in active litigation for the years 2006 through 2011. What is does do is skip one of the many lengthy and costly parts of the process. It also gives municipalities – Valdez, Fairbanks North Star Borough and North Slope Borough a solid budget number for 2012 budgets.

“What this means – it’s unusual for us – is we know now what we’re going to have for the rest of the year,” John Hozey, city manager, said during the meeting. “Normally we don’t find this out until June.”

This is due to the timeline and vagaries the state sets for its assessment and appeals process. For instance, in 2010 TAPS was assessed at $9.3 billion in taxable value. In March 2011, the Dept. of Revenue assessed its value at $6.7 billion, $2.6 billion less than the year before. Valdez and the other municipalities that tax the pipeline appealed that number. SARB re-assessed its taxable value in June 2011 to $7,932,979,800.

Photo courtesy of Wikipedia

he 800 mile Trans-Alaska Pipeline runs from the North Slope to its terminus in Valdez.

Last year’s yo-yoing valuation caused budgeting headaches for city administration early in the year, with a windfall of sorts showering the city in cash mid-way through its budget cycle.

The agreement ties-in with the lawsuits slowly winding through the judicial process. On December 30, 2010, the Alaska Superior Court ruled TAPS values at $8.941 billion in 2007, $9.644 billion in 2008 and $9.249 in 2009. A decision on an appeal filed by TAPS owners for the 2006 valuation is expected in eight to 12 months.

“This would all be part of that,” Walker said.

The agreement will remain in place until the appeals courts issues its ruling “allowing the parties to seek a resolution while preserving each party’s right to appeal the 2012 assessment,” the agreement says.